COMMISSIONER OF INCOME-TAX, TAMIL NADU vs. S. BALASUBRAMANIAN

CIVIL APPEAL No. 4048/1984Supreme Court[1998] 2 S.C.R. 41524 March 1998Bench: 2 JudgesAuthor: SUJATA V. MANOHAR, D.P. WADHWA OF INCOME10 pages
AI SummaryAllowed

What were the facts?

The assessee, a Hindu Undivided Family (HUF), was granted development rebate for assessment years 1960-61 to 1965-66 on new machinery and plant. Subsequently, on August 1, 1967, a partial partition of the HUF's properties occurred. The machinery and plant, on which development rebate was allowed, were allotted to two coparceners at their written-down value. These coparceners sold the machinery and plant to a third party on October 1, 1967, which was within eight years of their purchase. The Income Tax Officer (ITO) proposed to withdraw the development rebate, citing the sale within the statutory period. The Tribunal and the High Court upheld the assessee's contention that the withdrawal was incorrect.

What did the Supreme Court hold?

The Supreme Court allowed the appeal, holding that the development rebate was rightly withdrawn. The Court reasoned that Sections 33, 34, and 155(5) of the Income-tax Act, 1961, must be read together. Development rebate is granted when new machinery is wholly used by the assessee for their business for a period of eight years and is not sold or otherwise transferred. While a partial partition does not amount to a transfer, in this case, the machinery was sold to a third party by the coparceners within eight years. Therefore, the assessee (considering the HUF and coparceners collectively) did not use the machinery for its business for the requisite eight-year period, nor was it retained without sale or transfer. The Court distinguished the case from Malabar Fisheries Co. v. Commissioner of Income-Tax, Kerala, by noting that here, a sale to a third party occurred within the eight-year period after the partition, fulfilling the conditions for withdrawal under Section 155(5). The High Court's decision was overturned, and the question was answered in favour of the revenue.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the provisions of Section 155(5) of the Income-tax Act, 1961 are not applicable and that the development rebate allowed for assessment years 1960-61 to 1965-66 cannot be withdrawn by the Income-tax Officer? (Mixed law and fact, concerning Sections 33, 34, and 155(5) of the Income-tax Act, 1961). Assessee's contentions (as upheld by the Tribunal and High Court): The HUF, to whom the development rebate was allowed, did not sell or transfer the plant or machinery. Therefore, Section 155(5) of the Income-tax Act, 1961, was not attracted. The HUF had not ceased to utilize the amount credited to the reserve fund as contemplated by Section 34(3). Revenue's contentions: Under Section 33(1)(a), the assessee ceased to carry on the business before the expiry of eight years. The plant and machinery were sold by the coparceners before the expiry of eight years, thus failing to comply with Section 33(1)(a) and Section 34(3)(a), leading to the loss of the right to development rebate.

Which sections of the Income-tax Act were involved?

Section 33,Section 34,Section 155(5),Section 2(47)

AI-generated summary — verify with the full judgment below

COMMISSIONER OF INCOME-TAX, TAMIL NADU A v. S. BALASUBRAMANIAN MARCH 24, 1998 [SUJATA V. MANOHAR AND D.P. WADHWA, JJ.] B Income-Tax Act, 1961--Sections 33, 34 and 155(5)-Development Rebate-Withdrawal of-Business carried on by Assessee, a Hindu Undivided Family-Development Rebate allowed to assessee on new machinery and plant-Partial Partition of Joint Family properties-New Machinery and C Plant, allotted to two coparceners at written down value-Sold by them within eight years of purchase-Held, Development Rebate allowed earlier rightly withdrawn.

Section 2(47)-Hindu Undivided Family-Partial Partition-Share D allotted to coparcener-Does not amount to transfer.

Assessee, a Hindu Undivided Family, carried on business. For assessment years 1960-61 to 1965-66 development rebate was allowed to the assessee on new machinery and plant. On a partial partition of joint family properties, plant and machinery were allotted to two coparceners at written E down value. Within eight years of purchase the same was sold by them to a third party. The Development Rebate allowed earlier was withdrawn by the lncoine Tax Officer. In Appeal, the Tribunal held that the withdrawal of

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 33

All 65 judgments and leading authorities on Section 33 →

Recent GST High Court judgments

Search GST case law →